having a group of people with their fingers in every pie is bad because it will lead to anti-consumer anti-competitive corporate governance interventions.
It’s not clear to me that this is true.
If an investor has a finger in every pie, then it will mean that they are invested in a company and also that company’s competitors...
… but this doesn’t seem that important—they had an incentive to create cartels, Universal Owner or no.
What it does mean is that they are also invested in the company’s consumers—i.e. if one company acts to harm all consumers, this too will harm the wider economy and hence (for a universal owner) the wider portfolio.
So if anything, it seems that the opposite is true.
What it does mean is that they are also invested in the company’s consumers
No, public markets investors are not invested in e.g. McDonald’s consumers, because McDonald’s customers are natural persons and slavery is illegal. Since natural persons are the end point of consumption this is a very large omission. Less importantly, private companies, state owned enterprises, co-ops, sole proprietorships are also excluded.
I fear there may be a misunderstanding here, let me try to explain this more clearly.
Public markets investors largelyareinvested in the company’s customers.
There are two cases:
The customers are corporate bodies
The customers are individuals
If the customers are corporate bodies, then a universal owner almost certainly is directly invested in them.
If the customers are individuals, then a universal owner is invested in them in a natural language sense, rather than a finance sense. I.e. they don’t own a legal stake in the person, but they are invested in them in the sense that they have incentives to see them being better off.
Why?
Let’s illustrate with the McDonald’s example
Imagine that McDonald’s decided to conspire to ensure that they somehow got the same number of meals sold, but everyone had to pay more (e.g. by some sort of collusion with other food/restaurant providers).
Then everyone outside of the restaurant/food sector would be worse off (this is the heart of your concern).
If they are worse off, they have less savings (bad for the banking sector) and spend less on trinkets/holidays/other things (bad for the trinkets/holidays/other things sectors).
In other words, benefiting McDonald’s at the expense of the wallets of the general public is bad for the wider economy.
The upshot: the impact on the wider economy may make Universal Owners less likely to want to form cartels
If I think of myself as being purely an investor in McDonald’s (i.e. no UO thinking):
A McDonald’s cartel means more money comes to McDonald’s --> MORE PROFIT
If I employ UO thinking, then there’s two factors:
A McDonald’s cartel means more money comes to McDonald’s and the other cartel members --> MORE PROFIT
A McDonald’s cartel means the wider economy is worse off, which means the other companies in my portfolio perform worse --> LESS PROFIT
Is item 2 big enough to outweigh item 1? I don’t know—I haven’t done the modelling. But what I can say is:
Without UO, the incentive to form a cartel is still there
With UO, investors now incorporate factors which may push in the direction against cartels
Cartels are an example here, and could be substituted with anything that has the property that collusion between companies leads to benefits to them at the expense of the economy as a whole
If an investor has a finger in every pie, then it will mean that they are invested in a company and also that company’s competitors...
Blackrock generally are that way, although I don’t know whether they actually intervene in governance decisions as often as people sometimes fear. I’d guess there are a lot of industry-specific ETFs that intervene more often than they do though?
… but this doesn’t seem that important—they had an incentive to create cartels, Universal Owner or no.
Yeah I guess I’m not saying UO will make this worse, more that there could be a deeper problem that also afflicts UO.
What it does mean is that they are also invested in the company’s consumers
Every industry is aligned with its consumers’ interests in some ways and opposed in others. I wasn’t denying the presence of aligned incentives… it’s not obvious to me which is the stronger force and in what circumstances.
It’s not clear to me that this is true.
If an investor has a finger in every pie, then it will mean that they are invested in a company and also that company’s competitors...
… but this doesn’t seem that important—they had an incentive to create cartels, Universal Owner or no.
What it does mean is that they are also invested in the company’s consumers—i.e. if one company acts to harm all consumers, this too will harm the wider economy and hence (for a universal owner) the wider portfolio.
So if anything, it seems that the opposite is true.
No, public markets investors are not invested in e.g. McDonald’s consumers, because McDonald’s customers are natural persons and slavery is illegal. Since natural persons are the end point of consumption this is a very large omission. Less importantly, private companies, state owned enterprises, co-ops, sole proprietorships are also excluded.
I fear there may be a misunderstanding here, let me try to explain this more clearly.
Public markets investors largely are invested in the company’s customers.
There are two cases:
The customers are corporate bodies
The customers are individuals
If the customers are corporate bodies, then a universal owner almost certainly is directly invested in them.
If the customers are individuals, then a universal owner is invested in them in a natural language sense, rather than a finance sense. I.e. they don’t own a legal stake in the person, but they are invested in them in the sense that they have incentives to see them being better off.
Why?
Let’s illustrate with the McDonald’s example
Imagine that McDonald’s decided to conspire to ensure that they somehow got the same number of meals sold, but everyone had to pay more (e.g. by some sort of collusion with other food/restaurant providers).
Then everyone outside of the restaurant/food sector would be worse off (this is the heart of your concern).
If they are worse off, they have less savings (bad for the banking sector) and spend less on trinkets/holidays/other things (bad for the trinkets/holidays/other things sectors).
In other words, benefiting McDonald’s at the expense of the wallets of the general public is bad for the wider economy.
The upshot: the impact on the wider economy may make Universal Owners less likely to want to form cartels
If I think of myself as being purely an investor in McDonald’s (i.e. no UO thinking):
A McDonald’s cartel means more money comes to McDonald’s --> MORE PROFIT
If I employ UO thinking, then there’s two factors:
A McDonald’s cartel means more money comes to McDonald’s and the other cartel members --> MORE PROFIT
A McDonald’s cartel means the wider economy is worse off, which means the other companies in my portfolio perform worse --> LESS PROFIT
Is item 2 big enough to outweigh item 1? I don’t know—I haven’t done the modelling. But what I can say is:
Without UO, the incentive to form a cartel is still there
With UO, investors now incorporate factors which may push in the direction against cartels
Cartels are an example here, and could be substituted with anything that has the property that collusion between companies leads to benefits to them at the expense of the economy as a whole
Blackrock generally are that way, although I don’t know whether they actually intervene in governance decisions as often as people sometimes fear. I’d guess there are a lot of industry-specific ETFs that intervene more often than they do though?
Yeah I guess I’m not saying UO will make this worse, more that there could be a deeper problem that also afflicts UO.
Every industry is aligned with its consumers’ interests in some ways and opposed in others. I wasn’t denying the presence of aligned incentives… it’s not obvious to me which is the stronger force and in what circumstances.